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Many people use payday loans to cover a cash shortage, but because of the loan’s high cost and short turnaround time, it may be difficult to pay it back on time.
Defaulting on a payday loan can result in additional fees, collection calls and damage to your credit score. If you ignore the debt for too long, you could face a lawsuit and possibly have your paychecks garnished.
What happens if you don’t pay back a payday loan?
If you don’t repay a payday loan by its due date, the lender may consider it to be in default. Here's what you can expect to happen next.
You’ll likely be charged fees
Once your loan is due, a payday lender will withdraw the money from your bank account, if you've given them access as part of the loan agreement. If there’s not enough money in your account, the lender may make multiple attempts to withdraw funds from your account. Each failed attempt can trigger a bank fee against you.
A successful attempt could drain your account and cause other transactions to bounce, also resulting in fees.
Some payday lenders may also charge late fees for missed payments.
There may be collection calls
If your loan remains in default, lenders may call you, send letters from lawyers and even contact your relatives in an attempt to reach you. By federal law, debt collectors can only ask for help in locating you — they can’t explain your debt situation to anyone.
If a payday lender contacts you directly, know that it’s illegal for them to threaten you with arrest or jail time. Additionally, collections agents cannot call you incessantly or make false statements or threats about the amount you owe.
Though failure to repay a loan is not a criminal offense, some payday lenders have succeeded in unlawfully filing criminal complaints against borrowers. The Consumer Financial Protection Bureau advises anyone threatened with arrest for nonpayment to contact their state attorney general's office.
Even if a criminal complaint is filed against you in error, don’t ignore an order to appear in court. You could be arrested for ignoring a court order.
You may be taken to court
You can be sued for not paying back a payday loan, even if the loan amount is small.
Lenders typically win debt collection lawsuits because consumers don’t show up to court, according to a 2020 analysis from The Pew Charitable Trusts . The judge then enters a default judgment, and the court can begin to collect the money you owe on behalf of the collections agency.
You could face wage garnishments, bank account levies or property liens, so it’s important to show up in court if you get a summons to appear.
Your credit score may drop
Although your payday lender may not report late payments to the three major credit bureaus, your credit could be damaged if the debt goes into collections.
Collection accounts can stay on your credit report for seven years and can affect your ability to be approved for credit in the future.
What to do if you can’t repay a payday loan
You may have options to get out of payday loan debt, including extending the loan or settling the debt for less than you owe.
Request an extension
Some payday lenders may give you the option to roll over or renew the loan. This means you can delay repayment of the loan for an additional fee.
For example, if you borrow $100 for a $15 fee and can’t pay it back after two weeks, you might be able to extend the loan for another two weeks by paying an additional $15. You’d still owe the original $100, plus $30 in fees.
Though a rollover may provide short-term relief, it will increase what you owe, which can make it harder to get out of debt.
Did you know...
Payday lenders in sixteen states are required or allowed to provide extended payment plans to borrowers who request them, default or are at risk of defaulting, according to a 2022 report from the Consumer Financial Protection Bureau. Extension rules vary by state. These states include: Alabama, Alaska, California, Delaware, Florida, Idaho, Indiana, Louisiana, Michigan, Mississippi, Nevada, South Carolina, Utah, Washington, Wisconsin and Wyoming .
Negotiate the debt with a payday lender
Typically, a lender would rather collect money directly from you than sell your debt to an outside collections agency. Third-party debt collectors may pay the lender just a few pennies on the dollar to buy your debt. If you can, start by offering 50% of what you owe to settle the debt.
Get any agreement in writing, and make sure the document states that your loan balance will be reduced to zero.
Seek professional advice
For one-on-one advice on what to do if you can’t repay a payday loan, consult with a nonprofit credit counselor or legal aid center. These professionals may be able to assess your unique financial situation and advise you on your next moves.
Look into other ways to get the money
Extra income. A boost of income or a new loan can help you settle your payday loan debt. Look for ways to find fast cash such as selling household items or picking up a side gig.
Family loans. If you’re not in a position to qualify for a traditional installment loan, consider asking for a loan from a family member. A family loan can have a more flexible repayment plan. Just be sure both parties agree to the terms and get it in writing.
Payday alternative loans. Even with bad credit (a score in the 500s or below), you may be able to qualify for a payday alternative loan (PAL) at a credit union. Federal credit unions cap rates for PALs at 28%. You could borrow up to $2,000 and have up to a year to pay it off.
Cash advance apps. Another opportunity to get money quickly is with a cash advance through apps like EarnIn or Tilt. These apps let you borrow from your upcoming paycheck and typically don’t require a credit check. Just make sure you have enough money in your next paycheck to repay the cash advance plus cover your other financial obligations.
» MORE: Alternatives to payday loans
How to rebuild your credit after payday loan default
If your credit score takes a dive after defaulting on a payday loan, there are some actions you can take to rebuild your credit.
- Monitor your credit: Check your credit report for free with NerdWallet. Review your report to understand what you owe and if any accounts are past due. Dispute any errors with the three major credit bureaus (Equifax, Experian and TransUnion).
- Make on-time payments: Payment history accounts for a significant portion of your credit score. Consistent on-time payments towards your debt and other bills can make a positive impact.
- Lower your credit utilization: Pay down your revolving credit accounts to free up more available credit and build up your credit score. Aim to keep your credit utilization at 30% or lower.
- Avoid taking on additional debt: Hard credit inquiries can cause your score to slightly dip, and taking on extra debt could leave you financially overburdened.
» MORE: How to build your credit score
Frequently Asked Questions
Can you go to jail for not paying back a payday loan?
Defaulting on a payday loan is not a criminal offense, and it’s illegal for lenders to threaten you with jail time if you’re behind on your repayment. However, you can get arrested for failure to appear in court if you’re summoned, so take any court orders seriously.
Can you be sued for not repaying a payday loan after seven years?
While your loan may not disappear after a certain number of years, most states have a statute of limitations that prohibits creditors from suing borrowers after a certain amount of time has passed. In many states, the statute of limitations is from three to six years, according to the Consumer Financial Protection Bureau. However, acknowledging you owe the debt or making partial payments can reset that clock.
If you owe on a payday loan, can you get another?
Depending on your state laws, it may be possible to have more than one payday loan at a time. However, multiple payday loans can create additional pressure on your financial situation, so it’s best to limit borrowing from payday lenders.
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- 1. Consumer Financial Protection Bureau. Could I be arrested if I don't pay back my payday loan?. Accessed Mar 4, 2026.
- 2. The Pew Charitable Trusts. How Debt Collectors Are Transforming the Business of State Courts. Accessed Mar 4, 2026.
